 "ONGC stock hits new high after a gap of over 10 years; up 39% from June low")
ONGC share price record high: Shares of Oil and Natural Gas Corporation (ONGC) hit an all-time high of Rs 323.60, rallying 5.4 per cent on the BSE in intraday trade on Monday on strong growth prospects.
The stock of the state-owned upstream company surpassed its previous high of Rs 314.67 (adjusted to bonus issue), touched on June 9, 2014. A sharp run-up in the stock price has seen ONGC’s market capitalisation cross Rs 4 trillion. The stock ended five per cent higher at Rs 322.55 on the BSE as compared to 0.18 per cent rise in the BSE Sensex.
With a Rs 4.06 trillion market cap, ONGC is now the 15th most valuable listed company in India and the third most valued public sector undertaking (PSU) after State Bank of India (Rs 7.87 trillion) and Life Insurance Corporation of India (Rs 6.70 trillion), the BSE data shows.
The ONGC stock has bounced back 43 per cent from a low of Rs 227 touched on June 6. In the past one year, ONGC share price has outperformed the market by surging 91 per cent as against 21 per cent rally in the benchmark index.
ONGC is engaged in exploration, development, and production of crude oil, natural gas, and value added products. Maharatna ONGC is the largest crude oil and natural gas company in India, contributing around 68.2 per cent to Indian domestic production.
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It is also a significant producer of value-added products such as liquefied petroleum gas (LPG), superior kerosene oil (SKO), and naphtha. The company has joint ventures in the oil fields in Vietnam, Norway, Egypt, Tunisia, Iran, and Australia.
On May 29, 2024, S&P Global Ratings revised the rating outlook on ONGC to “positive” from “stable”.
“The positive rating outlook on ONGC reflects the outlook on the long-term sovereign credit rating on India. It also reflects our expectation that ONGC will maintain its solid stand-alone creditworthiness, benefitting from a strong financial profile and status as a national oil company,” global rating agency had said.
Meanwhile, according to Geojit Financial Services, ONGC is expected to improve its earnings performance backed by increased production at KG 98/2 field, improved realisations, monetisation of discoveries, increased capital expenditure (capex) and potential adjustment of windfall tax.
The ramp-up of the KG 98/2 is expected to boost the company’s oil and gas production in the coming years. Additionally, higher prices for its produce will support its performance as the windfall tax does not apply to KG 98/2.
“Furthermore, monetising new discoveries, securing premium gas prices for production from the nomination field, and potential improvement in net realisations for crude oil are expected to enhance earnings. Moreover, the company’s long term strong production guidance further assures better performance in the future,” the brokerage firm said.
Analysts at ICICI Securities, too, have a “buy” rating on ONGC with a target price of Rs 340 per share. Stronger cash flow and production outlook, coupled with meatier subsidiary earnings over the next two–three years and higher investment value of listed investments, may drive the uptick in the target price, the brokerage firm had said in the Q4 result update.
Going forward, the commencement of the large KG basin asset remains the key performance driver over FY25-26E will likely fuel a material jump in production.
The brokerage firm also expects conspicuous recovery in HPCL/ MRPL’s earnings prospects coupled with reducing leverage in ONGC’s consolidated balance sheet.